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Fewer Dealers Means More Costly Cars

Discreetly buried in the ‘Business’ section of the Boston Globe:

Fewer but bigger dealerships expected to boost car prices

By Megan Woolhouse and Erin Ailworth, Globe Staff  |  June 8, 2009

The shakeout in the US auto industry will mean fewer but larger dealerships – decreasing competition among dealers and pushing up consumer prices on some cars by several thousand dollars, according to auto companies and analysts.

Chrysler LLC and General Motors Corp., which have filed for bankruptcy protection, are expected to adopt a model similar to their Japanese counterparts – offering fewer brands and marketing them through fewer dealerships. Toyota, which surpassed GM as the world’s largest automaker, has about one-fifth the number of US dealerships as GM, but sells almost three times as many cars at each location, according to industry publication Ward’s Dealer Business.

Such streamlining – Chrysler’s trimming of dealerships is expected to begin tomorrow – will create more profitable businesses, say dealers and analysts, because surviving dealers will be able to sell a higher volume of cars per location…

But what is good for dealers may be bad for consumers.

Remaining dealerships will be able to charge more for cars, analysts say, because fewer dealerships make it harder for buyers to spark bidding wars. And as auto companies scale back factory production, heavy discounts and dealer incentives will dry up.

Tom Wilkinson, a GM spokesman, said once the "current glut" of car brands disappears, prices for GM cars will increase anywhere from $2,000 to $6,000 for a new vehicle.

Chrysler expects to see a price increase on new cars in the range of $1,000 to $2,000 over the next year or two, said Kathy Graham, a company spokeswoman. She cautioned, however, that prices are ultimately "market-driven."

Chrysler and General Motors plan to cut the number of dealers by more than 3,100 nationwide. Chrysler will trim 25 percent, and GM will slice 40 percent by the end of next year. In Massachusetts, several dozen GM and Chrysler dealerships face closure…

Paul Bertoli, co-owner of Pride Motor Group in Lynn, which sells Chevrolets, said that after GM emerges from bankruptcy – which is expected in 60 to 90 days – customers will flock to him.

"The Chevrolet competition is going to be the Ford dealer, the Toyota dealer, the Honda dealer," he said. "Not another Chevrolet dealer." …

Of course this is just economics 101.

It’s so elementary, even the 31 year old dismantling GM and Chrysler under Obama should have figured it out.

But why should we complain about having to pay $6,000 more per vehicle?

The UAW is going to survive – and flourish.

And after all, that is what really matters.

This article was posted by Steve on Monday, June 8th, 2009. Comments are currently closed.

19 Responses to “Fewer Dealers Means More Costly Cars”

  1. curvyred says:

    If their projections are true – they will not survive, they cannot even sale their cars for the most part at reduced prices, I expect it to worsen if the prices go higher.

    This the exact results when you have “brilliant” scholars who have no practical “real world outside of academia experience” running the show.

    • neocon mom says:

      Who says any of this is supposed to work to save Chrysler? It’s an exercise in government intervention, a precedent, an exercise that also has the useful benefit of creating a lot more folks who will turn to the government for help. A lot more sucklers at the teat of government benefits.

  2. Rusty Shackleford says:

    And…..car prices need to go up…..why again? Shoot, I can’t afford a new car as it is, what makes these dumbasses think I’m gonna want to buy one of their POS’s anyhow?

    (high prices or not)

    • jobeth says:

      If you can’t afford a car…you MUST use mass transportation…just like Europe.

      If Obalmy gets his way we will all be Europeans. Ain’t ‘dat nice?

      He and his idiots forget just one thing. Not everyone lives in NY, Chi town, or DC.

      Most sane Americans live in “fly over country” where it’s miles and miles between towns. If mass transit would have worked there, it would be there.

      Not everyone sees the “joy” in cliff living in large cities.
      Some of us like independence and space…with real grass and trees.

    • proreason says:

      Public Transportation increases their control over you.

      If you can’t jump in your car to go to the store, you can’t jump in your car to meet with people to defeat your masters.

    • jobeth says:

      You’re right Pro…because we know that at the first sign of a “riot” (aka a gathering they don’t like) they will stop all mass transit. Just to keep the peace mind you.

  3. Douglas says:

    I recently bought a car when the old one died after 9 years. My wife and I drove to 6 different (Chrysler) dealers, gave them our specs and found one or two cars on each lot that met them and told them to give us their best price. We made it very clear that we were looking that day and would buy the next.

    Of the 6 dealers, 2 gave us straight answers on price. One, after giving us his “best price” said, “If you find a better price someplace else come back because I can go lower”.

    Of those 6 dealers, 2 have since delcared bankruptcy and 2 will by closed by Chrysler tomorrow. Of course the sleezy slippery guys are still in business while the dealer who gave us a straight answer has just been closed.

    That’s great news for the consumer eh?

  4. Ragspierre says:

    This seems to explicitly violate both state and federal anti-competition laws. These statements by the auto-makers are damning.

  5. proreason says:

    “Remaining dealerships will be able to charge more for cars, analysts say, because fewer dealerships make it harder for buyers to spark bidding wars. And as auto companies scale back factory production, heavy discounts and dealer incentives will dry up. ”

    Several of us have been wondering what the economic benefit of shutting down dealerships could be.

    Now we know.

    Many dealerships prevented Chrysler from overcharging. That’s how capitalism works.

    Now that we have socialism, they will be able to charge whatever they want.

    That way, the UAW will continue to be able to have lifetime sinecures including delux health insurance and lifetime pensions for jobs that teenagers can learn in a few months.

    • Douglas says:

      But you see, despite being a “Dodge boy” I’m not stupid. If the prices don’t justify brand loyalty I’ll buy a Mahindra.

    • Right of the People says:

      Do what I do, I buy 1 – 3 year old, low mileage cars. They depreciate the most in the first 2 years, especially as soon as you drive it off the lot, so someone else pays for the big hit. This way I figure I’m not directly subsidizing the bastards from the UAW but I still buy cars built here. Oh for the days of cars that cost thousands, not tens of thousands. If we could get everyone to refuse to buy new cars from Government Motors and Fiasyler, maybe we could put a hurtin’ on the Useless Auto Workers.

    • neocon mom says:

      But pro, do you really think that they will be able to charge more for a product no one seems to want now? The foreign competition is beating the crap out of them and they charge more. You really think this isn’t designed to fail bigtime (and fail under the guise of private ownership, thereby providing a highly visible precedent and example of how “free-market” capitalism is failing?) There are enough young people who believe capitalism is bad, corporations are evil and will buy the whole story. These folks will change the mythology of the American dream if we let them.

    • badcrow says:

      An excellent read here from “American Thinker” I’ve decided that it’s used cars for me from now on. I just can’t justify supporting a nationalized industry and this author explains my reasons far better than I ever could.


    • proreason says:

      neocon mom: “But pro, do you really think that they will be able to charge more for a product no one seems to want now? ”

      Your thought process assumes capitalism and freedom is the economic model.

      Under socialism, if you want a car, you will buy the car the commissars want you to buy, or nothting.

  6. TwilightZoned says:

    Hum…I will be in the market for a car within the next 8 months. I was considering the 2010 Buick LaCrosse. However, with GM’s bankruptcy and now the news of a cost increase just because they can-I may seriously pass. I wonder how shooting yourself in the foot feels?

  7. peterscott says:

    In the market for a car within the next 8 months. I was considering the 2010 it will be a BMW cars now the news of a cost just because they can-I may seriously.
    want you to buy, for nothing
    BMW Cars

  8. peterscott says:

    you could join the best home business in the world and still end up unsuccessful. Or you could join the worst home business in the world and still end up a huge success. It all falls on you. It’s not the companies fault if your home business is not succeeding, it is yours.
    BMW Cars

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